What's a good exit strategy for this? - Posted by Jim (NY)

Posted by Jim (NY) on September 03, 2003 at 08:15:11:

Thanks, Larry. What kind of expenses would be associated w/a Lease option on my end? Just taxes & insurance? I would probably ask the T/Ber’s to pick up the first $200 per incident of maintenence. In addition, there wouldn’t be any management expenses figured into the deal, right? I understand the concept of a L/O, but I’ve never done one. Thanks!

What’s a good exit strategy for this? - Posted by Jim (NY)

Posted by Jim (NY) on September 02, 2003 at 21:03:47:

A realtor brought me to a property with the following:

Comps: ~210k
Asking: 179K

3br/1 bath.

The house is vacant, and the realtor has indicated that the seller (they’ve moved out of state and already have a new home) would be flexible on the asking price to the tune of ~10k . The house has got a new roof & siding. The interior needs some cosmetic work (new carpet, paint, possible kitchen & bath update). In addition, it needs a new furnace. The FMV rent for a house like this would be ~1,700/month. I don’t think that there is a possiblity to get positive cash flow out of this house as taxes in the area are high. It seems like it might be a good deal from an equity standpoint, but I’m wondering what a good exit strategy for this might be. Thanks!

Re: What’s a good exit strategy for this? - Posted by Mike G

Posted by Mike G on September 03, 2003 at 11:45:02:

Depends on your goals. If your looking for a long-term rental and have the cash for a DP, maybe offer $160k or so, fix-up and rent out.

But if you’re looking to generate a quick profit, this is hardly a deal. Assuming it would take only about $6k in repairs, I wouldn’t pay any more than $140k tops (would start w/ an offer of $120k, pointing out all the repairs needed, only 1 bath, etc.). Would reduce this price dollar for dollar for any repairs over $6k. Could then either 1) use hard money and purchase yourself, fix up and sell retail or 2) assign your contract to another investor for a fee.

This prob wouldn’t make a good lease option b/c of the required upfront repairs and iffy monthly cash flow.

Re: What’s a good exit strategy for this? - Posted by Larry

Posted by Larry on September 02, 2003 at 23:39:35:

Sounds like maybe a Lease Option to me since there is not a big spread in price.

Best of luck.

-Larry